Job-order costing is used when products are manufactured to customer order. Costs such as direct materials, direct labor, and manufacturing overhead are traced to each individual job. Key characteristics include maintaining separate cost records for each distinct job and applying a predetermined overhead rate to allocate overhead costs to jobs. Typical examples that would use job-order costing are special order printing, construction projects, hospitals, and law firms.

1. I Costi per commessa
Systems Design: Job-Order Costing

2. Types of Costing Systems Used to
Determine Product Costs
Process
Costing
Job-order
Costing
 Many different products are produced each period.
 Products are manufactured to order.
 Cost are traced or allocated to jobs.
 Cost records must be maintained for each distinct
product or job.
 Many different products are produced each period.
 Products are manufactured to order.
 Cost are traced or allocated to jobs.
 Cost records must be maintained for each distinct
product or job.

3. Types of Costing Systems Used to
Determine Product Costs
Process
Costing
Job-order
Costing
 Typical job order cost applications:
 Special-order printing
 Building construction
 Also used in the service industry
 Hospitals
 Law firms
 Typical job order cost applications:
 Special-order printing
 Building construction
 Also used in the service industry
 Hospitals
 Law firms

4. Quick Check 
Which of the following companies would be
likely to use job-order costing rather than
process costing?
a. Scott Paper Company for kleenex.
b. Architects.
c. Heinz for ketchup.
d. Caterer for a wedding reception.
e. Builder of commercial fishing vessels.
Which of the following companies would be
likely to use job-order costing rather than
process costing?
a. Scott Paper Company for kleenex.
b. Architects.
c. Heinz for ketchup.
d. Caterer for a wedding reception.
e. Builder of commercial fishing vessels.

5. Job-Order Costing
Direct
material
Direct
material
Direct
labor
Direct
labor
Manufacturing
overhead (OH)
Applied to each
job using a
predetermined
rate
Manufacturing
overhead (OH)
Applied to each
job using a
predetermined
rate
Traced directlyto each job
Traced directly
to each job
The JobThe Job

6. Sequence of Events in a Job-
Order Costing System
Receive
orders from
customers
Receive
orders from
customers
Schedule
jobs
Schedule
jobs
Order
materials
Order
materials
Begin
production
Begin
production

7. Manufacturing
Overhead
Manufacturing
Overhead
Job No. 1Job No. 1
Job No. 2Job No. 2
Job No. 3Job No. 3
Charge
direct
material and
direct labor
costs to
each job as
work is
performed.
Charge
direct
material and
direct labor
costs to
each job as
work is
performed.
Sequence of Events in a Job-
Order Costing System
Direct MaterialsDirect Materials
Direct LaborDirect Labor

8. Apply
overhead to
each job
using a
predeter-
mined rate.
Apply
overhead to
each job
using a
predeter-
mined rate.
Sequence of Events in a Job-
Order Costing System
Direct MaterialsDirect Materials
Direct LaborDirect Labor
Job No. 1Job No. 1
Job No. 2Job No. 2
Job No. 3Job No. 3Manufacturing
Overhead
Manufacturing
Overhead